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Study on the Relationship between CSR and Financial Performance

Author

Listed:
  • Sang Jun Cho

    (School of Business Administration, College of Business and Economics, Chung-Ang University, 84 Heukseok-ro, Dongjak-gu, Seoul 06974, Korea)

  • Chune Young Chung

    (School of Business Administration, College of Business and Economics, Chung-Ang University, 84 Heukseok-ro, Dongjak-gu, Seoul 06974, Korea)

  • Jason Young

    (College of Business, Washington State University, Pullman, WA 99164, USA)

Abstract

This study analyzed whether a systematic relationship exists between corporate social responsibility (CSR) performance and corporate financial performance using 191 sample firms listed on the Korea Exchange. The Korea Economic Justice Institute (KEJI) index of 2015 was used to measure CSR performance; profitability and firm value were used to measure corporate financial performance. Return on assets was used as a proxy for profitability, and Tobin’s Q was used as a proxy for firm value. The correlation between these variables and CSR performance was examined through correlation and regression analysis. The results confirm that CSR performance has a partial positive correlation with profitability and firm value. These results are partly consistent with those of previous studies reporting a positive relationship between CSR and Korean firms’ financial performance using the KEJI index before 2011. In the relationship between CSR performance and profitability, only social contribution yields a statistically positive correlation. Analysis of the correlation between CSR performance and financial performance indicators revealed a positive relationship between the growth rate of total assets and corporate soundness and social contribution. Both soundness and social contribution showed a positive correlation with Tobin’s Q, the measure of corporate value.

Suggested Citation

  • Sang Jun Cho & Chune Young Chung & Jason Young, 2019. "Study on the Relationship between CSR and Financial Performance," Sustainability, MDPI, vol. 11(2), pages 1-26, January.
    • Handle: RePEc:gam:jsusta:v:11:y:2019:i:2:p:343-:d:196826
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